Crossing a Red Line

(2 of 2)

This much is known for sure. Last November, Heywood — who met Bo and Gu in Dalian and told friends he helped get their son into elite British private school Harrow — died in Chongqing. At the time, local sources blamed his demise on either a heart attack or excessive consumption of alcohol, a curious explanation given that Heywood rarely drank, according to friends. His body was quickly cremated without an autopsy. In February a longtime Bo aide, Wang Lijun, made a mad dash from Chongqing, where he was the police chief and deputy mayor, to the U.S. consulate in Chengdu a few hours away. Claiming that he feared for his life, Wang told the Americans that Gu was involved in Heywood's death. "Had Wang Lijun not gone to the U.S. consulate, we might still be singing red songs," says Minxin Pei, a China expert at California's Claremont McKenna College, referring to Bo's success in getting Chongqing residents to warble communist ditties en masse. "There are many aspects of this scandal that should give us pause about the future of the Chinese political system. This guy [Bo] almost made it."

The Chinese public is gorging on stories of the Bo family's extravagant lifestyle, as well as of a global business empire that depended on assumed names to obscure its assets. Bloomberg uncovered commercial interests helmed by Gu's sisters worth at least $126 million. Online anger had already been rising over incidents in which the relatives of senior bureaucrats acted with impunity, like running over traffic victims and expecting to get away with it. In 2010, Li Jianhua, former head of China's National Audit Office, was quoted on a state-media website as saying that what most angered regular Chinese citizens was the wealth accrued by the offspring of top leaders. There's a Chinese saying for the phenomenon: when an official is promoted, even his chickens and dogs ascend to heaven.

Child Support
The confluence of political power and family business widened during the leadership of former President Jiang Zemin, who invited businessmen into the Communist Party for the first time. (The richest 70 deputies for China's parliament are now worth nearly $90 billion, according to the Shanghai-based wealth monitor Hurun Report.) During Jiang's presidency, his son Jiang Mianheng, who has an electrical-engineering degree from a U.S. university, ran a venture fund founded by the Shanghai government. Levin Zhu, the son of Zhu Rongji, Premier under Jiang, is CEO of investment bank China International Capital Corp. Zhu's predecessor as Premier, Li Peng, the godfather of the controversial Three Gorges Dam, has a daughter who is CEO of a Chinese power company and a son who for nearly a decade ran China Huaneng Group, an even bigger state power firm.

The pattern has continued during the decade of leadership of President Hu and Premier Wen Jiabao. Hu's son Hu Haifeng ran a state-owned security company that won a contract to provide scanners for explosives to all of China's airports at the time. Then there's Wen Yunsong, the son of Premier Wen, the government's most vocal Bo critic who recently wrote in a party magazine that power should be "exercised in the sunshine" and "the biggest threat to a ruling party is corruption." Armed with an M.B.A. from Northwestern University, Wen Yunsong, also known by his English name, Winston, co-founded a Beijing-based private-equity fund in 2005. In February, after he was named chairman of state-owned China Satellite Communications Corp., shares of a Hong Kong — listed subsidiary shot up by nearly 50%.

Trading on family ties is hardly exclusive to China. Would Hillary Clinton be U.S. Secretary of State if her husband had not been President? Would their daughter, who has no journalism background, have been taken on by an American TV network if it were not for her famous parents? But the scale and style of such dealings are different in China. "In the U.S., people know about these connections, but in China none of this has been made public," says Mao Shoulong, director of the school of public administration at Renmin University in Beijing. "You have no idea who owns what and even who is whose son." Few official checks on power exist. "There's no legal system set up to tackle the abuse of power and conflict-of-interest issues," says Mao, who has advised China's leadership on governance. "Party secretaries will say, Well, why can't I or my family members hold stocks in a local enterprise? How is that corruption?"

Perhaps not, but just in documented graft cases alone, the money involved is staggering. Last year China's central bank estimated that, from the mid-1990s through the middle of 2008, up to 18,000 people associated with the state, from communist cadres to senior state-owned enterprise employees, had absconded abroad with the equivalent of nearly $127 billion at today's exchange rates. The report's online version generated much comment in Chinese cyberspace — and was quickly removed from the bank's website.

It's worth remembering that China's 1989 student protests began not only as a yearning for democracy but also as a movement against official corruption. No one's suggesting that the Bo scandal will catalyze a popular revolt. But in a sensitive transition year when China's slowing economy can no longer be counted on to buy people's happiness, politics as usual may not be enough for the People's Republic. "By purging Bo, the government will claim that this represents the party's determination to clean itself up," says Li Weidong, an influential blogger. "But the party never apologizes to the public and never admits wrongdoing." Given an increasingly sophisticated populace with ever more access to information, such spin may not work in future. Meanwhile, once jailed journalist Jiang is playing it safe. Since 2009, when he was released from three further years of house arrest, he has been in exile in Canada. Though Bo may be gone, Jiang has no plans to return home. "Only a good political system can prevent abuses," says Jiang. "China doesn't have that yet."

— with reporting by Austin Ramzy, Chengcheng Jiang and Jessie Jiang / Beijing